Question 1 – Gumnut Corporation
a. Direct-material price
=
PQ(AP – SP)
=
30,000($2.20*– $2.00)
=
$6,000 Unfavorable
AP* =$2.20 = $66,000
30,000
b. Direct-material quantity
variance
=
SP(AQ – SQ)
=
$2.00(30,000 – 29,000*)
=
$2,000 Unfavorable
SQ* = 29,000 lbs. = 1,450 20 lbs. per unit , SQ= Standard quantity allowed
c. Direct-labour rate
variance
=
AH(AR – SR)
=
8,000($18.90* – $18.00)
=
$7,200 Unfavorable
$151,2008,000
d. Direct-labour efficiency
variance
=
SR(AH – SH)
=
$18.00(8,000 – 7,250*)
=
$13,500 Unfavorable
e. Variable-overhead spending variance
=
$11,000 – (8,000)($1.50)
=
$1,000 Favorable
variance
=
SVR(AH – SH)
=
$1.50(8,000 – 7,250)
